Billions in Oil Missing in Iraq, US Study Finds
By James Glanz
The New York Times

Saturday 12 May 2007

Between 100,000 and 300,000 barrels a day of Iraq's declared oil production over the past four years is unaccounted for and could have been siphoned off through corruption or smuggling, according to a draft American government report.

Using an average of $50 a barrel, the report said the discrepancy was valued at $5 million to $15 million daily.

The report does not give a final conclusion on what happened to the missing fraction of the roughly two million barrels pumped by Iraq each day, but the findings are sure to reinforce longstanding suspicions that smugglers, insurgents and corrupt officials control significant parts of the country's oil industry.

The report also covered alternative explanations for the billions of dollars worth of discrepancies, including the possibility that Iraq has been consistently overstating its oil production.

Iraq and the State Department, which reports the numbers, have been under relentless pressure to show tangible progress in Iraq by raising production levels, which have languished well below the United States goal of three million barrels a day. Virtually the entire economy of Iraq is dependent on oil revenues.

The draft report, expected to be released within the next week, was prepared by the United States Government Accountability Office with the help of government energy analysts, and was provided to The New York Times by a separate government office that received a review copy. The accountability office declined to provide a copy or to discuss the draft.

Paul Anderson, a spokesman for the office, said only that "we don't discuss draft reports."

But a State Department official who works on energy issues said that there were several possible explanations for the discrepancy, including the loss of oil through sabotage of pipelines and inaccurate reporting of production in southern Iraq, where engineers may not properly account for water that is pumped along with oil in the fields there.

"It could also be theft," the official said, with suspicion falling primarily on Shiite militias in the south. "Crude oil is not as lucrative in the region as refined products, but we're not ruling that out either."

Iraqi and American officials have previously said that smuggling of refined products like gasoline and kerosene is probably costing Iraq billions of dollars a year in lost revenues. The smuggling of those products is particularly feared because officials believe that a large fraction of the proceeds go to insurgent groups. Crude oil is much more difficult to smuggle because it must be shipped to refineries and turned into the more valuable refined products before it can be sold on the market.

The Shiite militia groups hold sway around the rich oil fields of southern Iraq, which dominate the country's oil production, the State Department official said. For that reason, he said, the Shiite militias are more likely to be involved in theft there than the largely Sunni insurgents, who are believed to benefit mostly from smuggling refined products in the north.

In the south, the official said, "There is not an issue of insurgency, per se, but it could be funding Shia factions, and that could very well be true."

"That would be a concern if they were using smuggling money to blow up American soldiers or kill Sunnis or do anything that could harm the unity of the country," the official said.

The report by the accountability office is the most comprehensive look yet at faltering American efforts to rebuild Iraq's oil and electricity sectors. For the analysis of Iraq's oil production, the accountability office called upon experts at the Energy Information Administration within the United States Department of Energy, which has long experience in analyzing oil production and exports worldwide.

Erik Kreil, an oil expert at the information administration who is familiar with the analysis, said a review of industry figures around the world - exports, refinery figures and other measures - could not account for all the oil that Iraq says it is producing. The administration also took into account how much crude oil was consumed internally, to do things like fuel Iraqi power plants and refine into gasoline and other products.

When all those uses of the oil were taken into consideration, Mr. Kreil said, Iraq's stated production figures did not add up.

"Either they're producing less, or they're producing what they say and the difference is completely unaccounted for in any of the places we think it should go," Mr. Kreil said. "Either it's overly optimistic, or it's unaccounted for."

Several analysts outside the government agreed that such a large discrepancy indicated that there was either a major smuggling operation in place or that Iraq was incapable to generate accurate production figures.

"That's a staggering amount of oil to lose every month," said Philip K. Verleger Jr., an independent economist and oil expert. "But given everything else that's been written about Iraq, it's not a surprise."

Mr. Verleger added that if the oil was being smuggled out of Iraq, there would be a ready market for it, particularly in smaller refineries not controlled by large Western companies in places like China, the Caribbean and even small European countries.

The report also contains the most comprehensive assessment yet of the billions of dollars the United States and Iraq spent on rebuilding the oil and electricity infrastructure, which is falling further and further behind its performance goals.

Adding together both civilian and military financing, the report concludes that the United States has spent $5.1 billion of the $7.4 billion in American taxpayer money set aside to rebuild the Iraqi electricity and oil sectors. The United States has also spent $3.8 billion of Iraqi money on those sectors, the report says.

Despite those enormous expenditures, the performance is far short of official goals, and in some cases seems to be declining further. The average output of Iraq's national electricity grid in 2006, for example, was 4,300 megawatts, about equal to its value before the 2003 invasion. By February of this year, the figure had fallen still further, to 3,800 megawatts, the report says.

All of those figures are far short of the longstanding American goal for Iraq: 6,000 megawatts. Even more dispiriting for Iraqis, by February the grid provided power for an average of only 5.1 hours a day in Baghdad and 8.6 hours nationwide. Both of those figures are also down from last year.

The story is similar for the oil sector, where - even if the Iraqi numbers are correct - neither exports nor production have met American goals and have also declined since last year, the report says.

American reconstruction officials have continued to promote what they describe as successes in the rebuilding program, while saying that problems with security have prevented the program from achieving all of its goals. But federal oversight officials have frequently reported that the program has also suffered from inadequate oversight, poor contracting practices, graft, ineffective management and disastrous initial planning.

The discrepancies in the Iraqi oil figures are broadly reminiscent of the ones that turned up when some of the same energy department experts examined Iraq's oil infrastructure in the wake of the oil-for-food scandals of the Saddam Hussein era. In a United Nations-sponsored program that was supposed to trade Iraq's oil for food, Mr. Hussein and other smugglers were handsomely profiting from the program, investigations determined.

In reports to Congress before the 2003 invasion that ousted Mr. Hussein, the accountability office, using techniques similar to those called into play in its most recent report, determined that in early 2002, for example, 325,000 to 480,000 barrels of crude oil a day were being smuggled out of Iraq, the majority through a pipeline to Syria.

But substantial amounts also left Iraq through Jordan and Turkey, and by ship in the Persian Gulf, routes that could also be available today, said Robert Ebel, a senior adviser at the Center for Strategic and International Studies in Washington.

"Any number of adjacent countries would be glad to have it if they could make some money," Mr. Ebel said.

Mr. Ebel said the lack of modern metering equipment, or measuring devices, at Iraq's wellheads made it especially difficult to track smuggling there. The State Department official agreed that there were no meters at the wellheads, but said that Iraq's Oil Ministry had signed a contract with Shell Oil to study the possibility of putting in the meters.

The official added that an American-financed project to install meters on Iraq's main oil platform in the Persian Gulf was scheduled to be completed this month.

As sizable as a discrepancy of as much as 300,000 barrels a day would be in most parts of the world, some analysts said it could be expected in a country with such a long, ingrained history of corruption.

"It would be surprising if it was not the case," said John Pike, director of GlobalSecurity.org, which closely follows security and economic issues in Iraq. He added, "How could the oil sector be the exception?"

Lots of money to be made, but luckily there are some convenient scapegoats.

The Americans would not have anything to do with it of course, since their administration has been a model of "good governance". Don't forget, Paul Wolfowitz orchestrated the war. How could it be otherwise?

"Mission accomplished," Bush said. He probably was telling the truth, but which mission did he have in mind?

With billions of dollars unaccounted for, how many more thousands of American soldiers and tens of thousands of insurgents and militias will die?

Here's one to America's stewardship of the World!

They hung Saddam Hussein [or set the conditions for it] and went on to create [supposedly] a freer, less sectarian, more stable, more democratic society. Saddam's head rolled literally, and Bush let the world know how he slept through it peacefully on his vacation retreat, with orders that no one disturb him that night. Saddam's blood was spilled, but by the next day Halliburton, Dick Cheney, Wolfowitz, Rumsfeld, Bush and Co. could all claim to be richer than the day before. Oh, what a beautiful life!

And if perchance you perceive some nicks in the USA's shiny armor of good governance and godly-directed mission to impose freedom anywhere it wants [like the proverbial elephant], you can always blame them on those insurgents who... "hate us because they hate our freedom".

[quote]Hope the insurgents take out a few more oil export pipelines.[/quote]
Does not sound like a solution to anything...

[quote]Anything to deprive the infinitely greedy Americans of what they covet above all else-
money.[/quote]
It's already too late for that... and don't forget, most of us who visit the forum are indeed Americans (and not infinitely greedy).

It's better to focus on ending the war now, for all the families involved (Iraqi, British, American, and other).

[quote]Would solve one thing[/quote]
... ... ... and what would that "one thing" be?

Aragorn, I have been in firm opposition to the [AMERICAN RULING ELITE] 's War on Iraqis well before it started. I have been marching and writing against it ever since and I will not stop until this ignominious war and resulting daily massacres end. On this forum, I have written a couple of days ago a post that passes in review, as in A HALL OF SHAME, a short list of the main architects of the war, while they are still in power and very capable of hurting me and my loved ones, as they have hurt an incredible number of other families. However, I believe deeply that to keep silence in the face of a CRIME AGAINST HUMANITY does not make us worthy of the freedom that we enjoy in our everyday lives. The silence of the majority has been the fuel that has made possible this war by the AMERICAN AND BRITISH RULING ELITES against the exploited peoples of the world and Iraq in particular. When all is said and done, nobody will ever be able to say that I have conspired by my silence. My family and I have taken a clear stand against the war and encouraged others to do the same. I believe that we would not deserve to live in America, enjoying the fruits of American idealism, while tolerating America's wars of oppression against the disenfranchised people of the Earth. I will tell you today that in my view: President Bush is a war criminal. Dick Cheney is a war criminal. Tony Blair is a war criminal. Richard Perle is a war criminal. Paul Wolfowitz is a war criminal. Donald Rumsfeld is a war criminal. Condoleezza Rice is a war criminal. Alberto Gonzalez is a war criminal. And obviously, I could go on.

I can cite names of individuals who have been directly responsible for starting and continuing this war, instead of speaking out only against broad segments of the world ruling elites, because I know that many individuals who pertain to those elites have been equally passionate against this distressingly immoral war and yet belong to the ruling elites, due to the happenstances of world history, demographics, economics, nationalism, education level, religious and non-religious convictions, career development, immigration history, sexual attraction, deepest personal love between individuals, and in the majority of cases a staggering amount of pure old dumb luck. Indeed, how many among us can comfortably withdraw ourselves, from where we stand behind our sophisticated computers, from membership in the ruling elites of the world? Most of us not only belong but will retain (and fight to retain) our privileges, in spite of our ideological beliefs and differences.

This is the way of the world, I know. But here I stand (among millions) to say that certain crimes ought not to be committed IN MY NAME for the preservation of someone else's selfish privileges or even mine. Here I stand to say that certain crimes ought not to be committed IN THE NAME OF JESUS or in the name of the CHRISTIAN FAITH OR ANY OTHER RELIGION. Here I stand to say that certain crimes ought not to be committed in the name of FREEDOM. Here I stand to say that certain crimes ought not to be committed in the name of DEMOCRACY. Here I am to say that certain crimes ought not to be committed in the name of OUR SHARED HUMANITY. Here I am to say that certain crimes ought not to be committed in the name of preservation of our privileges to serve the seemingly infinite greed of the few. Here I am to say that the most heinous crimes against humanity ought not to be committed IN MY NAME, IN YOUR NAME, IN OUR NAMES, if we still harbor any shred of conscience against the free flow of innocents' blood in specific areas of the world currently stressed out by naked imperialist forces. Here I am to say that we ALL have a duty to say NO, when it counts and while we may still influence others. Here I am to say that I will not be silenced and that you ought not to be either.

More and more people are speaking out and discovering that when they do the most powerful and seemingly untouchable politicians suddenly appear quite vulnerable. They are now resigning their positions in droves to pursue less shameful avenues of material enrichment. We had forgotten, since 2001, that our collective voices were still the most powerful force against their lies, their weapons of mass deception, their armies, their intimidating tactics, their institutionalized violence. But our voices are getting clearer and in the not too distant future, they will be in full retreat in this war that has been waged overwhelmingly by our children, and not theirs.

It is time for us to tell the [Bush, Cheney, and Blair]'s of this world: STOP FUCKING WITH US. WE WILL NOT TAKE IT ANY MORE.

But please, let us not be seen as encouraging any act of terrorism of any party against any other. It is time for the innocent to stop paying the price for the guilty.